Review of Quantitative Finance and Accounting

, Volume 7, Issue 3, pp 259–278

Accrual usage to manage earnings toward financial analysts' forecasts

  • James W. Bannister
  • Harry A. Newman

DOI: 10.1007/BF00245253

Cite this article as:
Bannister, J.W. & Newman, H.A. Rev Quant Finan Acc (1996) 7: 259. doi:10.1007/BF00245253


This study examines whether management uses discretionary accounting accruals to move earnings upward toward analysts' earnings forecasts when it appears that earnings before discretionary accruals will fall short of the forecast. An earnings shortfall relative to analysts' forecasts could lead management to fear lower compensation and an increase in the likelihood of job termination. The article finds that firms whose earnings before discretionary accruals are below analysts' forecasts use income-increasing discretionary accruals and do so to a greater extent than do firms whose earnings before discretionary accruals are above analysts' forecasts.

Key words

earnings managementanalyst forecastsdiscretionary accruals

Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • James W. Bannister
    • 1
  • Harry A. Newman
    • 2
  1. 1.Department of Accounting, Barney School of Business and Public AdministrationUniversity of HartfordWest HartfordUSA
  2. 2.Department of Accounting, Graduate School of Business AdministrationFordham UniversityNew YorkUSA